<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1995
Commission File Number 33-3711
NATIONAL BANCSHARES CORPORATION
Ohio 34-1518564
State of incorporation IRS Employer
Identification No.
112 West Market Street, Orrville, Ohio 44667
Address of principal executive offices
Registrant's telephone number: (216) 682-1010
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__. No _____.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of November 9, 1995:
Common Stock, $10.00 Par Value: 732,778 Shares Outstanding
1
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National Bancshares Corporation
Index
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of September 30, 1995 and
December 31, 1994 (Unaudited)
Consolidated Statements of Income 4
for the three and nine months ended
September 30, 1995 and 1994
(Unaudited)
Consolidated Statements of Cash Flows 5
for the nine months ended
September 30, 1995 and 1994
(Unaudited)
Notes to Consolidated Financial 6
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 6
of Financial Condition and
Results of Operations
Part II. Other Information 8
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of matters to a vote of
security holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
Signatures 9
2
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Unaudited) 09/30/95 12/31/94
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 6,254,327 $ 8,261,107
Investment securities
held to maturity 76,200,529 85,550,038
Approximate market value
September 30, 1995 $ 78,149,000
December 31, 1994 $ 84,126,000
Investment securities available
for sale 4,888,227 4,687,610
Federal funds sold 12,345,000 11,885,000
Loans:
Commercial 25,121,505 18,030,839
Real estate mortgage 29,940,420 30,778,748
Installment 16,030,553 9,014,853
-----------------------------
Total loans 71,092,478 57,824,440
Less: Unearned income 555,969 718,683
Allowance for loan losses 1,009,770 890,666
-----------------------------
Loans, net 69,526,739 56,215,091
Accrued interest receivable 1,952,184 1,662,369
Premises and equipment 2,263,288 2,378,202
Other assets 2,337,843 2,402,567
-----------------------------
TOTAL $175,768,137 $173,041,984
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Demand $ 24,557,744 $ 24,036,115
Savings and N.O.W.s 71,016,774 77,298,869
Time 50,842,686 44,527,256
-----------------------------
Total deposits 146,417,204 145,862,240
Securities sold under
repurchase agreements 4,091,356 3,269,919
Federal reserve note account 1,000,000 1,000,000
Accrued interest payable 493,174 374,890
Other liabilities 430,496 445,686
-----------------------------
Total liabilities 152,432,230 150,952,735
-----------------------------
SHAREHOLDERS' EQUITY
Common stock - $10 par value;
6,000,000 and 750,720 shares authorized, 732,156
shares issued and outstanding 7,321,560 7,321,560
Surplus 4,689,800 4,689,800
Retained Earnings 11,324,547 10,077,889
-----------------------------
Total shareholders' equity 23,335,907 22,089,249
-----------------------------
TOTAL $175,768,137 $173,041,984
=============================
</TABLE>
See notes to consolidated financial statements
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Unaudited) Three months ended Nine months ended
09/30/95 09/30/94 09/30/95 09/30/94
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,626,122 $1,212,732 $4,512,031 $3,472,252
Interest on federal funds sold 166,720 59,654 392,929 166,958
Interest and dividends
on investments
US government obligations 609,109 609,435 1,966,403 1,883,506
Obligations of states and
political subdivisions 261,093 269,999 787,951 807,712
Other securities 527,930 527,309 1,667,873 1,588,739
---------- ---------- ---------- ----------
Total interest income 3,190,974 2,679,129 9,327,187 7,919,167
INTEREST EXPENSE:
Interest on deposits 1,180,105 900,600 3,314,060 2,610,051
Expense of funds purchased 67,986 22,051 192,537 68,599
---------- ---------- ---------- ----------
Total interest expense 1,248,091 922,651 3,506,597 2,678,650
---------- ---------- ---------- ----------
Net interest income 1,942,883 1,756,478 5,820,590 5,240,517
PROVISION FOR LOAN LOSSES 45,000 45,000 135,000 135,000
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,897,883 1,711,478 5,685,590 5,105,517
NONINTEREST INCOME 178,070 176,486 548,416 517,299
NONINTEREST EXPENSE:
Salaries and employee benefits 705,995 582,767 1,955,168 1,713,900
Net occupancy expense 110,186 93,419 308,598 290,221
Data processing expense 183,764 166,864 527,452 494,579
Franchise tax 77,250 75,750 231,750 227,250
FDIC premium (9,174) 72,303 147,022 216,905
Other expenses 321,017 321,153 1,022,001 906,561
---------- ---------- ---------- ----------
Total noninterest expense 1,389,038 1,312,256 4,191,991 3,849,416
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 686,915 575,708 2,042,015 1,773,400
INCOME TAXES 146,164 101,113 427,019 320,831
---------- ---------- ---------- ----------
NET INCOME $ 540,751 $ 474,595 $1,614,996 $1,452,569
========== ========== ========== ==========
EARNINGS PER COMMON SHARE * $0.74 $0.65 $2.21 $1.98
========== ========== ========== ==========
<FN>
* Earnings per common share have been restated for the 25% stock dividend issued October 15, 1994.
See notes to consolidated financial statements
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited) Nine months ended
09/30/95 09/30/94
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 1,614,996 $ 1,452,569
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and Amortization 462,758 486,402
Provision for Loan Losses 135,000 135,000
Changes in Operating Assets and Liabilities (143,637) (331,955)
------------ ------------
Total Adjustments 454,121 289,447
------------ ------------
Net Cash Provided by Operating Activities 2,069,117 1,742,016
Cash Flows From Investing Activities:
Proceeds from Maturities of Investments 8,000,271 5,025,000
Purchases of Investment Securities 1,000,000 (7,583,564)
Capital Expenditures (84,339) (80,779)
Net (Increase) in Loans (13,446,648) (3,195,013)
Decrease (Increase) in Other Assets 175,393 (1,282,224)
------------ ------------
Net Cash (Used in) Investing Activities (4,355,323) (7,116,580)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Demand
and Savings Accounts (5,760,466) 2,697,597
Net (Decrease) in time deposits 6,315,430 (1,222,174)
Net Increase(Decrease) in Short-Term Borrowings 821,437 (1,221,419)
Dividends Paid (636,975) (585,976)
------------ ------------
Net Cash Provided by Financing Activities 739,426 (331,972)
------------ ------------
Net Change in Cash and Cash Equivalents (1,546,780) (5,706,536)
Cash and Cash Equivalents at Beginning of the Period 20,146,107 20,022,624
------------ ------------
Cash and Cash Equivalents at End of the Period $ 18,599,327 $ 14,316,088
============ ============
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 3,388,313 $ 2,675,211
Income Taxes $ 410,817 $ 279,314
<FN>
Cash and Cash Equivalents include Cash and Due From Banks and Federal Funds Sold.
</TABLE>
See notes to consolidated financial statements.
5
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National Bancshares Corporation
Note to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The consolidated balance sheet as of September 30, 1995, the
consolidated statements of earnings for the three month and the nine month
periods ended September 30, 1995 and 1994, and the consolidated statements of
cash flows for the nine month periods ended September 30, 1995 and 1994 have
been prepared by the Corporation without audit. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included.
The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q, but do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. It is suggested that these statements be read in
conjunction with the consolidated financial statements and footnotes in the
Corporation's annual report on Form 10-K for the year ended December 31, 1994.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995.
A 5 for 4 (25%) stock dividend was declared on September 20, 1994.
The record date for the stock dividend was September 30, 1994 and issued
October 15, 1994. 314 fractional shares calculated were paid in cash,
resulting in 732,156 shares outstanding following the stock dividend. Earnings
per common share have been restated to reflect the 732,156 shares outstanding.
On January 1, 1995 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by creditors for Impairment
of a Loan", and SFAS No. 118, "Accounting by creditors for Impairment of a Loan
- - Income Recognition and Disclosures", which impose certain requirements on the
measurement of impaired loans. The Company has previously measured such loans
in accordance with the methods prescribed in SFAS No. 114. Consequently, no
additional loss provisions were required by the adoption of these statements.
SFAS No. 114 also requires that impaired loans for which foreclosure is
probable be accounted for as loans. The amounts of impaired loans, as defined
in SFAS No. 114, and impaired loans for which foreclosure is probable are not
significant. Thus, neither the initial adoption of SFAS No. 114 and SFAS No.
118, nor the on-going effect of these statements, has had, or is expected to
have, a material effect on the financial condition or results of operations of
the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Balance Sheets
Total assets increased $2.7 million or 1.6% above 12/31/94. Cash and
due from banks decreased approximately $2 .0 million, mainly the result of
decreased outgoing check letters at the end of the quarter as compared to
12/31/94. Total investment securities held to maturity decreased $9.4 million
from 12/31/94 mainly the result of maturities and early calls by issuers. Net
loans increased $13.3 million or 23.7% due to increased demand in the
commercial loan and installment loan areas.
Total deposits increased $555 thousand or approximately 0.4% above
12/31/94. Non-interest bearing demand accounts had a modest increase of 2.2%,
non-time interest bearing accounts decreased by $6.3 million. Time deposits
increased $6.3 million or approximately 14.2% above 12/31/94 which was
primarily in the public fund jumbo CD accounts. Securities sold under
repurchase agreements increased $821 thousand above 12/31/94. Total
shareholders' equity increased $1.2 million or 5.6% over 12/31/94 through
retained earnings.
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Statements of Cash Flows
Net cash provided by operating activities for the first nine months of
1995 was $2.1 million as compared to $1.7 million for the same period in 1994.
Net loans increased $13.4 million exceeding the proceeds of maturing investment
securities creating a net cash used in investing activities of $4.4 million.
As a result of modestly increasing total deposits, $739 thousand net cash was
provided by financing activities. This caused a net decrease in cash and cash
equivalents of $1.5 million during the first nine months of 1995. With total
cash and cash equivalents of $18.6 million as of 9/30/95, the Corporation's
liquidity ratios continue to remain favorable.
Analysis of Equity
Commercial banks whose deposits are insured by the Bank Insurance Fund
("BIF") are required to comply with certain minimum regulatory capital
requirements. The following is a summary of the Bank's regulatory capital
levels at 9/30/95.
REGULATORY CAPITAL
<TABLE>
<CAPTION>
(Dollars in Tangible Core Risk Based
Thousands) Capital Capital Capital
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
regulatory
capital $21,884 19.56% $21,884 19.56% $22,894 20.47%
Fully phased
in regulatory
capital
requirement 1,678 1.50% 4,474 4.00% 8,949 8.00%
---------------------------------------------------------------
Regulatory
capital
excess $20,206 18.06% $17,410 15.56% $13,945 12.47%
===============================================================
<FN>
*Adjusted risk based assets $ 111,858 (thousands)
</TABLE>
RESULTS OF OPERATIONS
The Company is on a fiscal year ending December 31st. Interest income
totaled $3.2 million or $512 thousand higher for the three months ended 9/30/95
as compared to same period in 1994. Interest expense was $1.2 million for the
three months ended 9/30/95 or $325 thousand above 1994. This caused an increase
of $186 thousand net interest income or approximately 10.6% increase for the
three month period ended 9/30/95 as compared to 9/30/94. The nine month results
for the periods ended 9/30/95 and 9/30/94 were an increase in interest income
of $1.4 million and an interest expense increase of $828 thousand. This
provided for a net interest income increase of $580 thousand or an 11.1%
increase for the nine months ended 9/30/95 when compared to 9/30/94.
Net interest rate margins were 5.33% and 5.28% for the first nine
months of 1995 and 1994, respectively. Both the interest yields on assets and
interest rates on interest bearing liabilities were generally higher in the
first nine months of 1995 over 1994. Yields increased 55
7
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basis points as compared to interest costs which increased only 50 basis points
in 1995 over 1994. These increases were mainly the result of a generally
increasing interest rate environment.
Provision for loan losses were $45,000 for the three month periods and
$135,000 for nine month periods ended 9/30/95 and 9/30/94. Net charge-offs for
the nine months ended 9/30/95 were $16 thousand as compared to $9 thousand for
the same period in 1994.
Noninterest income was $178 thousand for the three months ended
9/30/95 or approximately $2 thousand above the same period in 1994.
Noninterest income for the nine months ended 9/30/95 were $548 thousand or
approximately 6% over 1994.
Noninterest expense was $1.4 million for the three months ended
9/30/95 or 5.9% over the same period ended 9/30/94. Year to date noninterest
expenses were $4.2 million and $3.8 million for the periods ended 9/30/94 and
9/30/95, respectively. This $343 thousand increase is primarily comprised of
an $241 thousand increase in salaries and benefits and $115 thousand in other
expenses. A significant portion of these increases are the result of increased
business volumes in existing markets along with the acquisition of the Seville
Office on December 16, 1994.
Net income was $540 thousand for the quarter ended 9/30/95 or 13.9%
above the same quarter of 1994. Net income was $1,614,996 for nine months
ended 9/30/95 as compared to $1,452,569 on 9/30/94. This $162 thousand
increase is equal to 11.2%. The increase was the result of increased volumes
and improved net interest margins during the first nine months of 1995 as
compared to the same period in 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of matters to a vote of security holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exhibit No. If incorporated by Reference,
Under Reg. Form 10-Q Documents with Which Exhibit
S-K, Item 601 Exhibit No. Description of Exhibits was Previously Filed with SEC
(11) 1 (pg 4) Computation of Earnings per Share Incorporated by reference
(27) Financial Data Schedule
</TABLE>
No other exhibits are required to be filed herewith pursuant to Item 601 of
Regulation S-K.
b. There were no Reports on Form 8-K filed for the quarter ended 9/30/95.
8
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Bancshares Corporation
Date: November 10, 1995 /s/ Charles J. Dolezal
------------------------------- --------------------------------
Charles J. Dolezal, President
Date: November 10, 1995 /s/ Michael D. Hofstetter
------------------------------- --------------------------------
Michael D. Hofstetter,
Secretary - Treasurer
(Principal Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,254,327
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,345,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,888,227
<INVESTMENTS-CARRYING> 76,200,529
<INVESTMENTS-MARKET> 78,149,000
<LOANS> 70,536,509
<ALLOWANCE> 1,009,770
<TOTAL-ASSETS> 175,768,137
<DEPOSITS> 146,417,204
<SHORT-TERM> 5,091,356
<LIABILITIES-OTHER> 923,670
<LONG-TERM> 0
<COMMON> 7,321,560
0
0
<OTHER-SE> 16,014,347
<TOTAL-LIABILITIES-AND-EQUITY> 175,768,137
<INTEREST-LOAN> 4,512,031
<INTEREST-INVEST> 4,422,227
<INTEREST-OTHER> 392,929
<INTEREST-TOTAL> 9,327,187
<INTEREST-DEPOSIT> 3,314,060
<INTEREST-EXPENSE> 192,537
<INTEREST-INCOME-NET> 5,820,590
<LOAN-LOSSES> 135,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,191,991
<INCOME-PRETAX> 2,042,015
<INCOME-PRE-EXTRAORDINARY> 2,042,015
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,614,996
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
<YIELD-ACTUAL> 5.33
<LOANS-NON> 78,276
<LOANS-PAST> 88,338
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,823,254
<ALLOWANCE-OPEN> 890,666
<CHARGE-OFFS> 25,054
<RECOVERIES> 9,158
<ALLOWANCE-CLOSE> 1,009,770
<ALLOWANCE-DOMESTIC> 146,613
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 863,157
</TABLE>
